The Centre for Advanced Financial Research and Learning (CAFRAL), in collaboration with the Initiative for Policy Dialogue (IPD) at Columbia University, held a two-day international conference in New Delhi on "Capital Account Management and Macro-Prudential Regulation for Financial Stability and Growth" during 13-14 January 2014.

The objective of the conference was to discuss how systemic risk can build up in the financial sector and ways to prevent it from rising excessively.

The conference drew participation from policy makers, central bankers, multilateral institutions, policy think tanks, and academia from several countries, including India.

The conference recognized cross-border financial flows and excessive leverage as key sources of systemic risk and emphasized the need for policy makers to ensure that they had in their toolkit a sufficient number of instruments encompassing fiscal, monetary, exchange rate, macro-prudential, and capital flow measures to address such a risk.

The conference also emphasized the need for central banks and governments to work together, especially at times of stress.

The conference noted that to the extent managing systemic risk has become an important objective, some pre-crisis notions such as central bank autonomy, inflation targeting, and freer capital flows need to be revisited.

There was also consensus that monetary policies of advanced economies have significant spillover impact on EDEs, imposing macroeconomic costs on them, and that advanced economies have to be sensitive to these spillovers and share the burden of adjustment.